Vital Statistics:
| Last | Change | |
| S&P futures | 2885 | 4.25 |
| Oil (WTI) | 52.48 | 0.24 |
| 10 year government bond yield | 1.58% | |
| 30 year fixed rate mortgage | 3.87% |
Stocks are higher this morning on no real news. Bonds and MBS are flat.
Announced job cuts fell to 41,557 according to the Challenger and Gray report. This looks at press releases, so they don’t represent actual cuts, just announcements. Retail (which has been a perennial weak spot) dominated, along with trade-related industrial cuts. Separately, initial jobless claims rose to 219,000.
The service sector decelerated in September, according to the ISM non-manufacturing survey. Separately durable goods orders fell slightly. We are definitely seeing a deceleration in business spending, and will see if this is only a temporary bump, or something more permanent.
Fannie and Freddie now guarantee about $7 trillion of mortgage debt, 33% higher than before the crisis. The amount of higher DTI loans is rapidly increasing, due to the GSE patch, which permitted them to do riskier loans. About 30% of GSE loans are high DTI, compared to 16% 3 years ago. FHA is even worse, with 57% high DTI, compared to 38% 2 years ago. “There is a point here where, in an effort to create access to homeownership, you may actually be doing it in a manner that isn’t sustainable and it’s putting more people at risk,” said David Stevens, a former commissioner of the Federal Housing Administration who led the Mortgage Bankers Association until last year. “Competition, particularly in certain market conditions, can lead to a false narrative, like ‘housing will never go down’ or ‘you will never lose on mortgages.’ ” The Trump and the Obama Administrations hoped to attract private capital back into the mortgage market, but so far it has been extremely limited.
New Rez has bought Ditech for $1.2 billion, as it works its way through bankruptcy. New Rez is part of Fortress which has been on an acquisition binge, buying Shellpoint last year. Fortress is owned by Japan’s Softbank.
Interesting stat: Remember the HAMP program, which was treated as a way to prevent foreclosures by modifying mortgages? Turns out that 57% of the modified loans from 2008 to 2013 re-defaulted.
The Daily Tearsheet 